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A negotiable certificate of deposit is a large denomination certificate of deposit (CD), a savings instrument issued by a bank. Usually bought by institutional investors, a negotiable certificate of deposit is normally issued in amounts ranging from $100,000 to $1 million or more. Investors in a negotiable certificate of deposit want a short term, discounted investment which provides a fixed interest rate return over an agreed period. The negotiable certificate of deposit often comes in bearer form and can trade in the highly liquid secondary market. A negotiable certificate of deposit trades at a discount to the face value, which is repaid on maturity. However, a negotiable certificate of deposit cannot be cashed-in before it matures. The issuing bank guarantees payment of the negotiable certificate of deposit. Investors consider a negotiable certificate of deposit a low-risk, low-interest security. Another term for a negotiable certificate of deposit is a Jumbo CD. |
